Up to a certain threshold, earnings are free of NICs. The main rates are payable on earnings above that level, but the employee and self-employed rates — though not the employer rate — are lower on earnings above a higher threshold see chart and table below. Rates in table apply above the stated thresholds. The chart and table ignore the employment allowance. In the chart, self-employed Class 4 NICs line excludes Class 2 contributions, which are shown in the table.
The chart shows annual thresholds, which for employee and employer NICs assume earnings are stable throughout the year. Unlike income tax, NICs are not charged on income from other sources such as savings, pensions or property. Payment of NICs qualifies individuals to receive certain social security benefits most notably the state pension.
In practice, however, the link between contributions paid and benefits received is vanishingly weak and NICs essentially act as a second income tax. NICs are levied on the earnings of individuals aged 16 or over. Individuals over the state pension age are not liable for employee or self-employed NICs, but employer NICs are still due on their earnings. In measuring earnings for NICs purposes:. NICs are not levied on other income, such as income from savings and investments, rental income from property, private pensions, state pensions and other social security benefits.
Unlike for income tax, private pension contributions made by an employee or self-employed individual cannot be deducted from earnings for NICs purposes. This makes sense, since unlike income tax NICs are not levied on the future pension income they generate.
This means that remuneration in the form of employer pension contributions escapes NICs altogether: there are no NICs when the money is paid into the pension, and no NICs when money is received from the pension either. NICs are formally divided into classes. The table below shows the current rates and thresholds of employee and employer NICs. Class 1 NICs liabilities are assessed separately for each period for which an employee is paid; the table shows the thresholds in weekly terms, as is conventional, but they are adjusted pro rata for employees who are paid say monthly.
Rates apply above the stated thresholds. The table ignores employment allowance. Rates of secondary Class 1 NICs shown are also the rates of Class 1A and Class 1B NICs, which apply respectively to those benefits in kind that are subject only to employer NICs and to PAYE settlement agreements, arrangements negotiated between employers and HMRC whereby employers agree to pay tax on earnings or benefits in kind which would otherwise fall to be paid by their employees.
NICs thresholds are usually expressed in weekly terms. But it unfairly creates differences in overall tax payments between people with similar annual earnings, depending on whether the earnings are received evenly through the year or vary from month to month.
Where an individual has more than one job, or earnings from both employment and self-employment, NICs are charged separately on each. Low earners thus pay less NICs if their earnings are split across jobs, but high earners do not pay more NICs if their earnings are split across jobs. Employer NICs have, in effect, a tax-free threshold per employer as well as a tax-free threshold per employee.
This takes many small employers out of paying employer NICs altogether, although much employer NICs revenue comes from big employers which are not eligible for the employment allowance. Two groups of employees have their earnings taxed less heavily:. The rates of the two are therefore not directly comparable, and when looking at the overall level of NICs on employment, the headline rates should not simply be added up and compared with the level of gross earnings see the technical note below.
A more informative calculation is to look at total NICs paid as a fraction of the total amount the employer pays out i. Read more applying between the primary threshold and the UEL — is not When considering the total NICs charged on a job, it is tempting simply to add up employee and employer NICs and look at how the total relates to earnings.
However, that is not very informative and can be misleading. The problems with simply adding up employee and employer NICs rates arise because employee NICs are taken out of earnings while employer NICs are paid on top of earnings. If it were all employee NICs, the employee would receive half of what the employer paid out; if it were all employer NICs, the employee would receive two-thirds of what the employer paid out. Worse, looking at total NICs relative to earnings is potentially misleading.
This rate and the equivalents for different levels of labour cost are shown in the chart below. The chart below shows the combined rates of employee and employer NICs. The chart highlights that, while NICs are progressive A tax is progressive if tax liability increases more than in proportion to the tax base, or to income. Read more across most of the earnings distribution — the average tax rate The amount of tax paid as a percentage of the tax base typically income.
Read more is higher for those earning more — it is not progressive A tax is progressive if tax liability increases more than in proportion to the tax base, or to income.
Read more at the top. The average rate peaks at The chart ignores employment allowance. Current NICs rates for the self-employed are shown in the table below.
The total NICs levied on self-employment income are therefore much lower than those on employment income, as shown in the chart below. There is no good justification for the preferential NICs treatment of self-employment. Self-employed NICs lines include Class 2 contributions in the average rate, but exclude them in the marginal rate. Check how much the National Minimum Wage is You are currently viewing: Find out how much National Insurance you need to pay for your employees Check how much sick pay your employees are eligible for Check how much you need to pay towards your employee's pension Check how much Maternity Leave you need to pay your employees Check how much Paternity Leave you need to pay your employees.
Step 2 : Make your workplace safe and accessible for employees. Prevent discrimination Make your workplace accessible for employees with disabilities or health conditions Keep employee information and data safe Fire safety Health and safety You also need to make checks when you recruit and employ someone.
Find out what you need to check when you employ someone. Register as an employer and set up PAYE Choose how to run payroll If you decide to run payroll yourself, choose payroll software. Step 4 : Check your responsibilities around workplace pensions. Understand your pension responsibilities as an employer. Step 5 : Get Employers' Liability insurance. Find out about Employers' Liability insurance. Step 6 : Recruit and employ staff. Employ someone. Is this page useful? Financial Services Limited is a wholly-owned subsidiary of Which?
Limited and part of the Which? Money Compare is a trading name of Which? Money Compare content is hosted by Which? Limited on behalf of Which? Tax calculators. National Insurance calculator Income tax calculator Council tax calculator Pension lump sum withdrawal tax calculator Dividend tax calculator Child benefit calculator Inheritance tax calculator All 7 calculators. In this article. Do I pay National Insurance?
National Insurance rates and National Insurance rates National Insurance calculator and Work out your tax bill. National Insurance calculator Income tax calculator Council tax calculator. All 7 calculators. Do your tax return online with Which? Use our jargon-free calculator to complete and securely submit your tax return direct to HMRC. More on National Insurance. National Insurance contributions. What is National Insurance? National Insurance and state pension. National Insurance credits.
0コメント